Stock markets in Europe are expected to open higher today on the back of strong stock market performance in the US yesterday and Asia overnight. In the US confidence in especially financial stocks was boosted by JP Morgan’s raised USD 10 a share bid for Bear Stearns and the unexpected increase in existing home sales by 2.9% m/m in February. S&P 500 and Nasdaq yesterday finished up 1.5% and 3.0% respectively. The positive sentiment continued in Asia with Nikkei up 2.3% and Hang Seng up 4.5% this morning.
With some confidence returning to financial markets bond yields in the US surged yesterday. 2Y and 10Y bond yields yesterday increased 19bp and 15bp and are trading at 1.79% and 3.50% respectively this morning. Credit spreads have tightened with the improved market sentiment.
Commodity prices stabilised yesterday after the sharp drop on Thursday. However, crude oil prices are slightly lower with the Nymex April future down 0.5% to USD 100.48 since yesterday.
On the FX market USD weakened overnight after rallying strongly on Thursday on the back of the sharp drop in commodity prices. USD this morning is trading 1.5540 against EUR and 100.17 against JPY. Because of the sharp drop in commodity prices on Thursday commodity currencies like AUD, CAD and NZD have weakened markedly since Thursday despite some of the loss being reversed overnight on signs of some stabilisation in commodity prices. Carry currencies have strengthened with some risk appetite returning to the market. In Scandinavia NOK overnight has reversed part of the loss suffered on Thursday on the back of lower crude oil prices. NOK this morning is trading 8.1058 against EUR.